How does the US FDIC apportion its premiums?

Question

I'm not from the US, and the banking system there is vastly different to how most other countries operate. So, I'm a little confused about how the FDIC apportions its premiums (the deposit insurance premiums banks are expected to pay to protect their depositors and the integrity of the financial system). I've heard that the US has over 8000 banks (which is an insanely large number compared to the number of banks in countries I've lived in), and from my understanding, these banks range from little local banks through to the national giants raking in billions, so how does the FDIC decide how much each bank pays? I was reading an article today about the 2008 GFC, and it said the FDIC expected banks to fork out an additional $15 billion in premiums in 2009 to replenish its funds. And I thought holy hell, how did the banks afford to pay that when they were already financially stressed? And how much were the little guys expected to pay - were these premiums apportioned according to the banks' earnings? Given US banks exist to make a profit (except the non-profits), wouldn't they just pass these costs onto their customers by charging higher fees and offering lower savings account returns? So at the end of the day, the US people would end up paying for this, right?

Sorry, I hope this question isn't too complicated or rubs salt into wounds about the way banks behaved during the GFC.

Answer 1

The FDIC publishes its rates if you want to get into the nitty gritty details. Broadly speaking, rates are determined by the amount of deposits an institution holds and the riskiness of the bank. If you want to determine what any particular bank would get charged, though, it would require a fair amount of analysis because there are adjustments in addition to the risk analysis which is a whole other level of complexity.

A large bank would end up paying between 1.5 and 40 basis points (cents per $100) of deposits. If a particular bank ended up with an assessed rate of 20 basis points, they'd pay $500 per year for insurance if a customer came in and opened a savings account with a $250,000 deposit.

Of course, any fee the bank pays becomes a part of their cost structure and becomes something that customers ultimately pay. Ideally, the fact that riskier banks pay higher premiums means that safer banks have slightly lower expenses and can hopefully attract more funds. Practically, though, FDIC insurance isn't a particularly large expense for most banks so the rate the FDIC charges isn't going to end up having a huge influence on the rates that bank can pay depositors. As with any insurance, the goal is for everyone to pay a bit so that no one ends up disasterously unlucky if their bank goes under before they can withdraw their life savings (as happened in the Great Depression which lead to the establishment of the FDIC).